Inbound vs Outbound Logistics: What's the Difference?
When setting up an e-commerce business, few things are as important as your logistics. These will determine your overhead, efficiency and speed, and if done right, will lead to customer happiness. However, when discussing logistics, we often hear terms like ‘inbound’ and ‘outbound’ floating around. So, once and for all: what’s the difference between inbound and outbound operations, and how can your business optimise both?
What are inbound and outbound logistics?
Inbound and outbound logistics are processes companies use to advance goods through their supply chain, including the transport, storage and delivery. Inbound logistics refers to the procedures dealing with commodities entering your business, whereas outbound logistics is all about those leaving. In other words, when we talk about inbound, we mean the supplies — which can either be raw materials or finished goods — from a manufacturer into your business. Outbound, on the other hand, is when you move your end-product (what you sell) to your end-user (your buyer). If we visualise it, a simple supply-chain tends to look like this:
Supplier or manufacturer → Your company → Customer
Of course, some supply chains are a tad more complicated, but these are the basics. Your company is at the centre, receiving materials or products from a supplier or manufacturer, and selling them on to customers. Inbound is the first arrow — the process of moving the items into your company. While outbound is the second arrow, the process of moving the items to your customer. Pretty intuitive, right?
What might not be as intuitive, though, is why this distinction matters. The inbound logistics process revolves around sourcing and purchasing the correct materials and receiving them. In this part of supply chain logistics, you’re the client. However, you then become the business. Once you accept the shipment, you either turn raw materials into new products to sell, or act as a retailer to move the items on. Then, your outbound operation starts, and includes order processing, picking and packing, as well as shipping and handling returns. So, as you can see, the distinction is not merely by name — the actions themselves are divergent and need to be considered separately.
What is the difference between inbound and outbound logistics?
Beyond the differences in practice and process, there are a few other points to bear in mind when comparing inbound and outbound logistics.
Different supply chain partner
Most likely, you’re not going to be working with the same supply chain partner for your inbound and outbound logistics. This makes sense, because the actions are different, as is the position on the supply chain. You may choose to work with a third-party service for either or both, but as the process is separate, you’re usually going to be operating with other associates.
Different onus for liability and damages
Remember how we explained that during the inbound process, you’re the client, whereas during the outbound part, you’re the vendor? This has consequences for what happens if something goes wrong. Agreements and contracts specify exactly which side is financially and legally responsible for any damage, which also includes who pays customs and taxes.
If you’re simply a retailer that accepts inventory from a brand and then sells it as-is, then the items on both your inbound and outbound logistics are going to be the same. However, more often than not, the goods being moved are different. In an inbound process, they’ll mainly be raw materials, tools, office equipment and resources, while outbound will deal with finished products that are sold to buyers.
How can you optimise your inbound and outbound logistics?
Now that we fully understand what inbound and outbound logistics are, and how they differ, now’s the opportunity to consider how to make your overall logistics as efficient as possible. This will make both yours and your customer’s lives easier.
1. Reduce inventory costs
When it comes to inventory and storing it, it’s crucial to find a Goldilocks solution. Hiring too much warehouse space will increase your overhead, while not having enough room will cause delays and inappropriate conditions that may harm your products. The same applies when it comes to receiving inventory — you want to order enough of it to be able to cover all your orders, but not too much so that your warehouse costs become unnecessarily high. Luckily, we live in the digital age, and AI can be great at predicting the quantities you’d need based on your anticipated demand.
2. Work with a fulfilment centre
Let’s be honest. Even though we tried our best at explaining this part of logistics, it’s still not the simplest area of business. The truth is, as important as it is, dealing with logistics and admin can be a real headache. This isn’t what you got into your role for, and it probably isn’t your forte, either. Partnering with a fulfilment centre takes away the hassle and places it at the hands of professionals. Supply chain partners like Bezos can streamline your processes, reduce your costs, and mitigate the headache that inbound or outbound logistics can sometimes cause. We can give you peace of mind when it comes to most parts of it, like receiving inventory, storing, picking and packing, shipping and handling returns — no matter the destination.
3. Build strong relationships with your suppliers
This is a no-brainer. If you want better contract terms, you need to form strong and long-lasting relationships with your suppliers, carriers and last-mile providers. This will save you money, reduce lead time, and ensure you’re receiving the best service. Other than being respectful and paying on time, as we’re sure you already do, try increasing your order quantities and informing them of your plans for the future. Your partners, regardless of inbound or outbound, can help you expand, and are professionals in their field, so building good relationships can mean a thriving future for your business.
So that’s that: the difference between inbound and outbound logistics explained. If you have any questions on the topic or want to find out more about the services we offer here at Bezos, please don’t hesitate to contact us at your nearest convenience. Thanks for reading.